The Botswana Financial Stability Council recently released its October 2024 report, which stated that the virtual assets market and cyber risks from fintech are currently posing minimal threats to financial stability in the country. Despite these risks being relatively undeveloped at the moment, the report warns that they could become more significant as technological innovation within the fintech sector advances. In fact, the report identifies the risks associated with a growing fintech sector as one of the top five potential threats to the financial system.
Botswana has been proactive in regulating cryptocurrencies, even though the market is still in its early stages. In January 2022, Botswana introduced a virtual assets bill along with five other legislative proposals, signaling a bold step towards recognizing crypto assets. This move may have been partly motivated by a need to address deficiencies in the country’s anti-money laundering and counter-terrorism financing regime, as highlighted by the Financial Action Task Force (FATF).
The Financial Stability Council’s report also mentions ongoing efforts to address vulnerabilities in the technology landscape to support financial stability. This includes the establishment of a fintech working group, which was launched on January 30, 2024. The working group aims to provide strategic direction on fintech matters and develop a National Fintech Strategy and a Fintech Analytical Assessment Framework to support the development of the financial services sector in line with national priorities on payment systems.
Comprising key national stakeholders such as the Bank of Botswana, government agencies, regulatory authorities, and financial services infrastructure providers, the fintech working group will play a crucial role in addressing the risks associated with emerging digital platforms that promote anonymity in transactions. These platforms increase the potential for money laundering and terrorist financing activities in Botswana.
To mitigate these risks, the financial stability report suggests implementing measures such as enhanced offsite monitoring of virtual asset service providers, engaging with the virtual assets sector regularly, conducting market surveillance, and collaborating with other law enforcement agencies to identify and combat illegal operators.
Overall, the Financial Stability Council’s report underscores the importance of staying vigilant and proactive in addressing potential risks stemming from the virtual assets market and fintech sector. By implementing robust regulatory measures and fostering collaboration among stakeholders, Botswana can maintain its financial stability and integrity in the face of evolving technological advancements.